A Survey of Companies Relating to the Solar Energy Industry in Louisiana With Regard to Economic Impact

Transcription

1 A Survey of Companies Relating to the Solar Energy Industry in Louisiana With Regard to Economic Impact A Report by Stefanie Gilliam, Charles Henkel, David Horaist, Pranjali Muley, Manish Patil and Cornelis de Hoop Initially written as a paper in partial fulfillment of requirements in the course RNR 4061/7029 Green Energy, Spring, 2013 School of Renewable Natural Resources Louisiana State University Contact Author: Cornelis F. de Hoop, Associate Professor 227 Renewable Natural Resources Building Louisiana State University Baton Rouge, LA (225) cdehoop@lsu.edu 1

2 Abstract There has been an increasing interest in renewable energy because of concerns relating to energy independence, greenhouse gases and other environmental issues. Solar and wind energy are commonly employed distributed renewable energy sources, due to their efficiency and simplicity of operation. To accommodate distributed energy sources such as solar photovoltaics, a concept of net metering was introduced in the 1980 s. Under this policy, consumers who own a renewable energy facility receive retail credit from the electricity company in their area for at least a portion of electricity they generate. Louisiana has a higher potential for solar energy than wind energy; hence, solar panels are commonly employed in residential (< 25 kw) as well as commercial/ag (< 300 kw) areas. Because public policy is at stake, it is important to evaluate net costs and benefits associated with net-metering system in Louisiana for solar energy resource. This paper provides a general overview of the net metering policies and procedures in Louisiana and the costs or benefits that net-metering systems would offer the residential and commercial customers. The objective of this study was to create a comprehensive analysis of the costs and benefits associated with net metering in Louisiana. A phone survey was conducted of solar installation companies. The survey covered the size of the company, the average employee wage, the total payroll, the amount of skilled and unskilled labor, gross sales and net profit. The number of installations and the gross sales of a company are proportional to size of the solar installation company. Estimated annual gross sales for the solar installation industry is $110 Million, employing about 400 people with a total payroll of $21 Million. 2

3 Introduction Once an initial investment is made, solar energy is a very clean and abundant form of energy. The amount of solar energy imparted on earth per hour is more than the annual global energy demand. Although almost the entire planet receives abundant solar energy, its concentration per unit square foot area is low, which makes it difficult to harness, store and utilize effectively. With ongoing research in this field, a few effective solar harness technologies have been developed. These technologies are characterized into two main groups: active solar and passive solar. Passive solar techniques do not use conventional energy sources; they make use of solar energy by designing buildings to receive maximum solar radiation during winter, selecting appropriate construction materials with light dispersing properties etc. Active solar techniques include photovoltaic panels and solar-thermal panels to harness and store solar energy more effectively. Solar thermal energy uses solar energy for thermal needs [1]. They may concentrate solar energy by the use of carefully installed mirrors or lenses (Figure 1). This concentrated solar energy is directly utilized as thermal energy, such as for heating water. These panels can easily replace coal fired electricity or natural gas for water heaters in residential and small commercial areas. Figure 1 Solar Thermal Energy for Water Heaters Solar cells convert light energy into electrical energy by the photovoltaic effect. When sunlight is incident on a certain material, its valance electrons absorb this energy, get excited and 3

4 jump into conduction band and are freed. These free electrons diffuse onto another material generating electromotive forces, thus converting light energy into electrical energy. Photovoltaic cells (also known as solar cells) are made of semiconductors and have one or more electric fields (voltage) that act so as to force electrons freed by light absorption to flow in a certain direction (current). Contacts can draw that current off for external use (Figure 2) [2]. The current with the voltage defines the power (or wattage) that the solar cell can produce. Figure 2 Solar Cell A typical solar panel system consists of four parts; photovoltaic cells, charge controller, batteries and inverter. Photovoltaic cells convert sunlight into electricity, a charge controller keeps batteries from overcharging or draining and ensures longer battery life. Batteries store energy while an inverter is used to switching DC to AC. It is also designed to protect the device against islanding. The photovoltaic system requires very little maintenance and can provide electricity for 20+ years (Figure 3) [3]. 4

5 Figure 3 Solar Panel System In order to encourage the use of renewable energy and reduce the load on conventional energy sources, government offers various incentives and tax credits to residents who use renewable energy techniques for electricity production. These incentives vary from state to state. Most parts of Louisiana get 5kW hours of solar energy per sq. m per day. Hence, Louisiana encourages solar panel installations by offering incentives and tax rebates to residents and commercial users. In addition to the federal rebate of 30% of installation cost, the State of Louisiana offers rebates of 50% of the first $25,000 that a resident invests in each system (legislation is being considered that alters the percentage for leased systems). Thus, Louisiana offers a tax credit of up to $12,500 for residents (including apartment complexes) that install a PV or solar thermal system. The tax credit covers materials and installation costs. The resultant increase in property value is exempt from property tax. The credit applies to all PV system types, regardless of being grid-tied, net metered or attached to a battery backup. Net Metering Electricity produced from solar panels can meet the load of most customers; excess electricity produced can then be fed to power grids. A meter monitors this feedback to the electric grid and the complete setup is known as net metering. Net metering allows customers of certain electric distribution companies to generate their own electricity in order to offset their electricity usage. These installations are connected to a meter, which measures the net quantity of 5

6 electricity that the customer uses (retail meter). The retail meter spins forward when the customer uses electricity from the distribution company, and it spins backward when the customer generates excess electricity (when feeding electricity to the electric grid). Net metering can lower customer s electricity bill by reducing the amount of electricity that the customer buys from the distribution company. Net metering allows customers to receive credits for any electricity that they generate but do not use. The system requirement for residential systems is up to 25 kilowatts and for commercial systems is up to 300 kilowatts. The one-time charge for installation of the Net Meters is $100. Billing for Net Metering [4] For the state of Louisiana, the billing rules for net metering are as follows 1. On a monthly basis, the net metering customer shall be billed the charges applicable under the current effective standard rate. Under net metering, only the kwh units of a customer s bill are affected. 2. If the kwhs supplied by the electric utility exceeds the kwhs that are generated by the net metering facility and are fed back to the electric utility during the billed period, the net metering customer shall be billed for the net kwhs supplied by the electric utility in accordance with the rates and charges under the customer s standard rate schedule 3. Where the electricity generated by the net metering customer exceeds the electricity supplied by the electric utility, the net metering customers shall be credited, during next billing period, for the excess kwh generated. The utility shall credit the net metering customers for the excess generated electricity at a value that is at avoided cost. Any payment for excess Kwh s supplied to the grid will be made when the account is finalized and the service is discontinued. If a customer supplies more energy than is purchased, the customer still will receive a minimum amount bill. Recently, the Louisiana Public Service Commission proposed some changes to these existing rules of net metering [5]. According to their report, LPSC wanted to charge a monthly fee of $50 to all net metering customers. This change was later modified to propose major 6

7 changes to the current net metering arrangements [5,6]. According to the final report, they proposed that the energy companies would buy excess energy produced by the customers at a wholesale rate, while selling their energy at a retail price. The Louisiana Solar Energy Society (LSES) strongly opposes this recommendation, stating that this would adversely affect the solar industry in Louisiana, claiming that both the $50 monthly fee and change in net metering buying rates are unjust and will drastically result in reduction of net metering/solar installation customers affecting the solar industry [5,6,7]. The objective of this study is to create a comprehensive analysis of the costs and benefits associated with net metering in Louisiana. Solar industry is an important part of Louisiana state economy and changes in its economy will directly affect the economy of Louisiana. Literature Review: Evaluation of Net Metering in Vermont (Conducted Pursuant to Act 125 of 2012 (2013), Public Service Department) The goal of the Vermont analysis was to make an evaluation of the current statute, rules and procedures and make recommendations on the issue of net metering [8]. The analysis included an examination of any benefits and costs of the electrical distribution and transmission within the state, and the effects upon net metering and non-net metering customers. Since 1998, the law has been modified many times, and the number of permit applications has grown by a factor of more than four since Photovoltaic systems account for almost 88% of all net metering systems, with wind and hydro systems representing about 11%. Vermont and California are the only states to have conducted a full analysis of the cost-shift question from a utility and ratepayer perspective. A Pennsylvania/New Jersey and two New York studies have also performed relevant statewide reports. The assumptions and methodologies used in these studies were also helpful in framing this analysis. The methodology of the analysis allowed the model to calculate costs incurred and benefits received from each typical net-metered generator on an annual basis. Some of the climate change factors determined a value of $80.00 per metric ton of CO 2. The cost of energy, capacity and transmission, which contributes to electric rates, may be avoided with net metering. The 7

8 avoided transmission and distribution costs depend on the state s and utilities load shapes. The report concluded that the qualitative benefits of solar PV increase as the tax credit decreases in future years, and that net metering did not impose a significant net cost to ratepayers who are not participants. The general assessment concluded in this analysis was that the current Vermont policy has been an overall success. It has promoted numerous small businesses and an industry that employs hundreds. The policy has not been perfect, but efforts to clarify and uniformity should add stability in utility procedures and state policies. This study showed that no policy is perfect and requires continual changes to reflect the needs of a state. Methods In order to evaluate whether the solar industry is an important aspect of Louisiana state economy we conducted a survey. A survey was conducted by phone to the known solar installers in Louisiana. Calls were made to the companies during business hours and their answers were recorded. Data was then analyzed using Microsoft Excel. Data on the energy companies was obtained from online sources provided by the companies. Other state s reports were also consulted. The survey questions were designed so as to know the annual turnover of the company, number of employees, size of the company etc. these questions gave us an understanding of what would happen if this industry collapsed. Louisiana Survey The following questions were asked in the survey 1. Who is the predominant energy company in your area? 2. What are your gross sales? 3. How long have you been in business? 4. Are you making a profit? 5. When did you start making a profit? 6. How many employees do you have? 8

9 7. What is your total payroll? 8. What is the average hourly wage per non-clerical employee? 9. What is the number of customers/ installations that you have? 10. Do you have any maintenance contracts? 11. What is the revenue on maintenance contracts? 12. What is the typical capacity of each residential system installed? 13. What is the capacity of each commercial system installed? Results and Discussion There are in all active solar companies in Louisiana, with their years in business ranging from 2-21 years. We received feedback from 13 companies out of the 35 companies. The following results are based on the feedback of these 13 companies. On an average, there are 9-10 employees per company. We project that there are approximately 400 people in total directly employed in Louisiana by the solar installation industry. The range of employment is anywhere between 2 to 50 employees. Hourly pay of the employees varies from $17.50 to $28; a majority of the companies pay around $25/hour. The Louisiana Department of Labor has additional statistics, but the authors were unable to obtain the information within the time frame of the semester class. All companies installed residential units with an average residential system capacity of kw. Residential units system capacity ranged from 6 25 kw. Five of the thirteen companies also installed commercial units with an average commercial unit capacity of 88.6 kw, ranging from kw. 9

10 Figure 4 Major Energy Comapnies The predominant energy company that net metered was Entergy (Entergy Louisiana, LLC and Entergy Gulf States Louisiana, LLC.) followed by SwepCo (Southwestern electric power company), DemCo (Dixie electric membership corporation) and ChelCo (Choctawhatchee Electric Cooperative, Inc.). Figure 5 Installations Based on Company Size Company size was defined based on the number of employees; a relationship was drawn between company size and number of installations per year. Obviously, the smaller companies 10

11 performed fewer installations each year, whereas the largest companies performed the most installations per year. The number of installations ranged from 25 to over a 1000 per year. Figure 6 Total Gross Sales The average annual gross sales of the solar companies is $3.14 million. The range of annual gross sales is from $750,000 to $8 million. All but one company is profitable and one of the startup companies is expected to be profitable by the end of Sales were higher for larger sized companies with the highest gross sale amount of $8M by a company with 50 employees. Conclusions The number of installations and gross sales of a company are proportional to size of the solar installation company. Solar energy contributes a significant amount of business to Louisiana s economy. We project that there are about 35 solar installation companies in Louisiana, with total annual gross sales for the industry of $110 Million, directly employing 400 workers with a total payroll of $21 Million. 11

12 References 1. Webpage: wikipedia.org/wiki/file:solarpipe-scheme.svg 2. Webpage: 3. Webpage: 4. Louisiana net metering rules: dnr.louisiana.gov/assets/docs/energy/altfuel/net%20metering%20final%20rules% pdf 5. Louisiana Solar Rebates and Incentives: PSC and Legislature Debate Solar Power Bill Robertson, Foster Campbell, Louisiana Public Service Commission 8. Public Service Department (2013), Evaluation of Net Metering in Vermont Conducted Pursuant to Act 125 of 2012, pp Weiss, Jurgen, Judy Chang and Onur Aydin (2012), The Potential Impact of Solar PV on Electricity Markets in Texas. The Brattle Group, Inc., 16pp. 12